Basically, a Service Level Agreement (SLA) is a contract between a provider of a service or product and a customer that could require inventory restocking, repairs or on-going enhancements. It commits suppliers to having resources ready and it commits the customer to on-going payments. Plus, itgets both parties protected when there needs to be future work done.
The transfer of responsibilities to a supplier from an organization is called outsourcing. This new arrangement is managed through contracts that could include more than one SLA. The contract could involve financial penalties if metrics of SLA are consistently missed, or more severe penalties. Managing, tracking and setting SLAs happen to be important aspects of the outsourcing relationship management (ORM) discipline.
Typically, there are negotiations done on specific SLAs up front as part of the contract of outsourcing and these are used as one of the main outsourcing governance tools. Here is a course entitled The Ultimate Guide to Outsourcing that will enable you to discover how your business can be outsourced to full time employees and freelancers.